India’s election clears path for real estate policy reforms

India’s ruling government, led by Narendra Modi, was re-elected last week in a sweeping victory, paving the way for policy reforms set to have significant impacts on commercial and residential real estate markets.

Since the National Democratic Alliance first came to power in 2014, it introduced the Goods and Services Tax (GST), the Real Estate Regulation and Development Act (RERA), and the ‘Housing for All by 2022’ scheme to fill the mammoth gap in demand for housing across the country.

After the recent election – where the incumbent government won 303 out of 542 constituencies across the country – property industry leaders are expecting continuity to drive promised changes and bolster the sector.

“The sector has now high hopes from the new government that has come to power with a thumping victory,” says Ramesh Nair, CEO and Country Head, JLL India. “With a complete majority, the government’s second term will help in implementing the provisions of these regulations at the national level in an effective manner. Any new regulation relating to the real estate market will thus be implemented without any opposition from any other political party in the country.”

Nair expects that institutional investments in the sector to double to $10 billion in 2019. “It will also add to the stability that the sector is witnessing,” he says.

What comes next

“On the back of robust policy measures implemented over the last five years, we expect the growth momentum in the real estate sector to continue,” Nair says.

Reforms such as RERA should be made uniform, experts say, and the mechanism should be implemented effectively across all states to boost homebuyers’ confidence.

Nair believes the new government should create an easier way to approve building permits and construction approvals. The government should also work to release the public land to create more affordable and mid-income housing.

Lowering interest rates, thereby improving affordability, liquidity and boosting housing demand, would also help, Nair adds. Since the election, expectations of an interest rate cut from the Reserve Bank of India have risen, following on from cuts in February and April this year.

Other than these, the property industry is awaiting a number of other related reforms and policy changes. Further modification of the GST rates, resolution of Insolvency and Bankruptcy Code rules, and bringing clarity to land titles are few among the key priorities of the new government.

“The continuity of reforms for the next five years is sure to auger well for the economy and real estate sector,” Nair says.